Updated: Nov 18, 2019
What is Trade War?
Put yourself in the place of Trump and observe your economy.
Your local US manufacturer can make computers for $900 each however his competitor in China producing the same product for $800. For the stability of your economy, what would you do? will you import the same product for $800 and sell them at $850 and let your local suppliers shut the door of their business? NO
Instead, you may impose tariffs to raise revenue or to protect domestic industries from foreign competition. So you imposed 25% Tariffs on computer imports.
So by making foreign-produced goods more expensive, you made domestic-produced ones more attractive and protected jobs. Imposing tariffs on a trading partner's main exports is a way to exert economic leverage.
When Trump recently announced Trade Tariffs on Chinese goods then everybody rushed to oppose his decision because investors were worried about a Trade War which eventually will affect both the economies so the global economy but has anybody tried to find why Trump imposed Tariffs?
It’s the first time the U.S. has imposed tariffs directly aimed at Chinese goods following months in which Trump accused Beijing of stealing American intellectual property and unfairly swelling America’s trade deficit. Trade deficit happens when a country imports more than it exports. As per data, US suffers its major Trade deficit from the following imports:
Iconic American companies such as Harley-Davidson Inc. are among those set to suffer. The motorcycle maker said this month it may move production out of the U.S. to avoid EU tariffs on its bikes. American businesses from Apple Inc. and Walmart Inc. to General Motors Co. all operate in China and are keen to expand. That hands Chinese President Xi Jinping room to impose penalties such as customs delays, tax audits, and increased regulatory scrutiny if Trump delivers on his threat of bigger duties on Chinese trade.
Trump is doubling down on his promise to put “America First” in the nation’s foreign and economic policies. He blames China for a bilateral trade deficit of $336 billion and for costing U.S. manufacturing jobs.
The riskiest economic gamble of Trump’s presidency could spread as it enters a new and dangerous phase by imposing direct costs on companies and consumers globally. China has vowed to hit back in kind on goods ranging from American soybeans to pork, which may in turn prompt Trump to raise trade barriers even higher.
On the other side, Vehicles could be the next battleground. The Trump administration is reviewing whether to introduce duties on imported cars and trucks in a bid it says to protect U.S. national security.
Trump argues that his approach will force other countries to trade more fairly, reducing America’s $552 billion trade deficit and prompting employers to return to America. But recent U.S. tax cuts and spending increases will probably buoy the dollar and the nation’s current-account deficit anyway.
The U.S. imports much more from China than the other way around, giving the U.S. an advantage in a tariff dispute. That means Beijing could focus on introducing bigger regulatory or tax burdens on American companies who operate in China or want to tap its growing market. It could even take the drastic steps of devaluing the yuan or reducing its $1.2 trillion holdings of U.S. Treasuries, measures that would hurt it as well as the U.S.
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